Most banks automatically allow customers to overdraft their accounts, then charge them $25 to $35 per “infraction.” It’s either that or suffer the embarrassment in public of being told your debit card is no good, banks say. Most banks don’t allow checks to bounce anymore. They pay the check amount and then charge you for it.

But with regulators heading toward new regulations, many banks — Wells Fargo is one — are allowing customers to opt out of the plan.

The legislation also would prohibit banks from imposing more than one overdraft fee a month, or six per a year.

If you knew banks could only charge you one overdraft fee a month, would you be more inclined to bounce a check?

Banks have a habit of coming up with new ways to make up for fees that are outlawed. Free checking, for example, could disappear, the New York Times reported this week.

About the blogger

Bob Collins has been with Minnesota Public Radio since 1992, emigrating to Minnesota from Massachusetts. He was senior editor of news in the ’90s, ran MPR’s political unit, created the MPR News regional website, invented the popular Select A Candidate, started several blogs, and every day laments that his Minnesota Fantasy Legislature project never caught on.

NewsCut is a blog featuring observations about the news. It provides a forum for an online discussion and debate about events that might not typically make the front page. NewsCut posts are not news stories.

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I keep two checking accounts, one with a lot of money in it, one with just a little. I use the smaller checking account for most everyday purchases, including online purchases. That way, if my account information is compromised, not much money is at risk.

Because I keep this checking account very low, it is not unusual for me to guess wrong and the debit card will not cover a purchase. No problem — I call my bank, transfer some funds from the big account to the small account, and ask the merchant to run it again.

Of course, the only way this works is that my bank doesn’t automatically charge me for overdrafts.

Lynn

U.S. Bank has one of the worst systems for charging customers with fees. First, here is there explanation of (pending) purchases made with your check card: “When you use your check card for a purchase, the merchant will send your card number and purchase amount to the bank for an approval or an “authorization.” This authorization generally confirms that an account is open and the purchase amount is acceptable. The purchase amount sent for authorization varies by merchant type. Most merchants will request an authorization for the exact purchase amount and others may send an estimate that is more or less than the actual purchase amount. Once the purchase is authorized and the transaction completed, the actual purchase amount will be deducted from your account, usually within two to three business days. If the authorization is not matched with an actual purchase within three business days, it will be removed from your account.”

So, that clearly means the actual transaction is not completed until the merchant sends for the authorization of the actual purchase price. Now, what U.S. Bank will do is charge you an overdraft fee on POTENTIAL overdrafts (while charges are still pending). I had this happen on one occasion — I deposited a large check after 3:00 p.m. (so counted towards next business day), used my card that night which, if the transaction was actually finalized would have put my balance at a -$3.57. I was charged a $35 fee for potentially overdrafting. When I went to the bank to investigate, the account history they printed for me showed the amount of the deposit being credited to my account prior to the charge that potentially would have caused an overdraft, yet they refused to reverse the fee on the basis that I could have potentially had a negative balance in my account. I have never actually overdrafted on an account nor come close as I did in this situation.

At that point I closed out all of my accounts with U.S. Bank and moved to Spire credit union where I am much happier and not being scammed out of my money.

matt

I bounced my share of checks in my day, used payday advance loans from the check cashing joints and direct deposit advance from my bank to cover purchases before they cleared. Being poor was awful damned expensive. Then I moved into comfortable middle class and got so comfortable I spent beyond my means and caught some charges again. I came to the realization that it is not expensive to be poor, rather it is expensive to be financially lazy. The penalty should be steep, you can package it any way you want, overdraft, let the check bounce, payday anticipation loan – there is a cost to use other peoples money. If only Barney Frank and the rest of congress understood this is also true of taxpayer money.

Donavon Cawley

My wife and I have had our own share of scrapes with the financial bottom the barrel over the last year and a half, and have encountered numerous issues regarding overdraft fees. Honestly, every single time we’ve ever incurred such fees, it was entirely on accident, usually on small, insignificant purchases, and done three or five times before we realize that we were below the zero dollar mark.

Each time we incurred overdraft fees, we ended up paying more in fees than in actual purchases. Perhaps the ability to overdraft would be useful for expensive purchases, but when it comes to packs of smokes and delicious tostadas at Taco Bell, I’d rather suffer the embarrassment of having my card turned down then have to pay $34 for a pack of Camel Filters.

If it were an oiption (which it isn’t at our bank), we would prefer not to have overdrafts, just so we KNOW we don’t have the money to pay for the little things, such as groceries. If banks were legislated into only being able to charge one overdraft fee a month, then perhaps some people would start bouncing checks left and right, but then again, the bank would simply close the accounts belonging to those people. There’s no threat of people “exploiting” the system. And even if there was chance of grifting and what not, it shouldn’t matter; honest people like me and my wife should no’t have to pay hundreds dollars in fees for the mandatory “convenience” of being able to spend money we don’t know we don’t have.

John Gochenouer

Yesterday a student showed me where she had made a mistake in her checkbook and accumulated $262 in fees in less than a week on checks that were only $107.62. Some of her checks were as little as $5.82 but each check was hit with a $28 late fee and each day $5 was added. She received no notices! Even if she deposited her $200 paycheck, thinking she had money in her account it still would not havecovered the fees and she’d continue writing overdrafts. By the time she received a snail-mail notice, she had a debt she couldn’t pay. This is predatory and our young people and poor people are the targets.